Spending confidence falls in Xmas run up

Following two months of recovery, the Nationwide Consumer Confidence Index fell 9 points in November to 89. The index is now below its 3 month average of 92 and 12 points lower than at this time last year. While the response to the Base Rate rise in November was less dramatic than to the surprise move in August, the second increase in rates is likely to have been a contributing factor to the fall in confidence.

Last month's optimism about the future evaporated in November with the Expectations Index falling by 13 points. Consumers appear to be more concerned about the future economic and employment situation although interestingly the detailed data shows that confidence in their incomes in the next six months remains upbeat.

Confidence about the current economic and employment situation also fell back in November, although only marginally. The Present Situation Index fell 2 points to 92 bringing it back in line with its 3 month average. November saw a shift in the proportion of consumers who now have a more definitive idea of whether they view the current economic and employment situation as good or bad as they move out of the neutral category.

Meanwhile, the fall in spending confidence has meant that the Spending Index has fallen to a new low of 90, suggesting that the Base Rate rise, higher utility prices and petrol prices, have had a dramatic impact on consumers' desire to spend. The index fell 3 points in November and is 22 points lower than a year ago and consequently is below its 3 month average of 94.

Elsewhere, consumers' expectations of future house prices fell 1% in November to 2.9%. This moderation in house price expectations is not a surprise given the rate rise as current and potential home owners evaluate their financial position before investing in bricks and mortar.

07 December 2006 © Moneyextra.com

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